while its quite possible that tx fees rise to self sustain mining activities by individuals i think it is also helpful to think of Bitcoin as digital gold.

as the central banks try to print more and more fiat to compensate for the financial crises caused by bad debt, a portion of this will flow to the only workable currency which has a fixed supply; Bitcoin. in that sense, one can expect the price of one Bitcoin to rise over the many coming years which is plenty of incentive by itself for individuals to mine. this is why i mine.

why do gold mining companies mine? there in fact are no tx fees for them. its based purely on price speculation. and despite the fact that many ppl hoard gold, why is the dollar amount of gold futures traded on the LBMA equivalent to that of fiat currencies and far outpaces that of ordinary commodities? its b/c gold, like Bitcoin and other fiat, is considered money. Bitcoins will always be traded on mtgox or other exchanges b/c there will always be ppl who think the price has topped out and wish to sell. as the price rises liquidity will increase further allowing miners to cash out.

If Bitcoin is still around in 40 years it should be pretty big and well-established.In that case I'm sure some people will see the benefit on contined mining of Bitcoin somehow even without block rewards.A possible source of income for a miner could be block chain services for light clients, since the block chain will probably be so huge by then that most people won't run a full client anymore.

i agree that tx fees will play a big part in miner profit. even now, i often will add a tx fee to ensure that my tx doesn't get stuck. i have an economic incentive to make sure my tx's go thru smoothly thus i don't mind paying it. the market will force those transacting in Bitcoin in the future to pay the fee otherwise they will not be allowed to participate. the idealogic principles upon which Bitcoin is based is clearly making ppl WANT to participate.

If bitcoin will be still there in 20 year not 40, probably there will be hundreds of transactions per blocks, so the rewards will be of tens of bitcoins per blocks.And probably the value of the bitcoin will be raised to hundred of $, and mining them will cost only a fraction of today. And the increased power of CPU could allow all the people that use bitcoin to mine them at high MHash/sec mantaing a high level of security.40 years in economy is a very long time: 40 years ago there's no Euro, $ and other fiat currencies are bonded to gold. In IT 40 years are like a geological era: 40 years ago there were no personal computer, and the computational power was of few kilo ops for second.

The block chain is a time stamping service for which the providers of that service are compensated in bitcoin. It does not matter that this compensation currently comes in the form of bitcoin inflation or that it will eventually have to come solely from the things being timestamped (bitcoin transactions). It just so happens that you can use the block chain to timestamp arbitrary things, not just bitcoin transactions (as CommitCoin has shown) and there are plenty of compelling uses for that. In the future, I think we'll see plenty of demand for this time stamping service for bitcoin transactions as well as other things. All that you need to sustain a healthy network is healthy demand. If the pricing structure isn't currently quite right for these services, it will be fixed.

There is no Tragedy of the Commons. What there is, is an underprovision of a Public Good. The public good in this case being security, not bandwidth or storage space for the block chain (which really does suffer from tragedy of the commons, but storage is so cheap that this is inconsequential).

Underprovision of public goods is a well studied topic and several market-based solutions have been suggested. Assurance contracts for example. These could be hard coded into the protocol in the far future. Or something.

But even if they are not, this does not automatically mean the death of Bitcoin. Even if total hashrate is underprovided, it will never fall to zero. Hash rate is a positive externality of a transaction fee, which some people will always pay for faster processing.

Historically, there are many examples of public goods that are produced in a suboptimal quantity, but they are produced nonetheless.

Just because bitcoin is suboptimal doesn't mean it will fail.

Look at bittorrent for an analogy. There are a lot of leechers who take more than their fair share and there is a shortage of seeders. But the technology still does its job.

Merged mining might help too, maybe hundreds or thousands of blockchains that in these early years were helped along by Bitcoin possibly more, in some estimations/opinions, than they in these early years help bitcoin, will get a chance to return the favour by continuing to retain bitcoin as the primary chain that nearly everyone merged-mining, no matter which other chains they choose to merged-mine, has in common?

You are worried that all miners will accept all transactions with fees resulting in everyone paying the minimum fee which will cause very low difficultly resulting in easy 51% attacks.

First, empirically, not everyone is accepting all tx with fees now. I don't have data to cite, but I've seen it.

Second, there is a solid game theory reason to decline some tx with fees. Assume you are a miner with 1% of total hashing power and everyone else is currently accepting all tx that have fees. If you raise your min accepted fee to say .001 anyone who requires their tx to be included in the next block with probability higher than 99% must pay at least .001. Even if you lose out on countless .00000001 fees the tiny fraction of people willing to pay to increase their chance of getting in the next block will increase your profits.

This might seem to imply that bigger miners (1% say) have an advantage over insignificant miners, but this is not the case. While the smallest have no pricing power whatsoever they benefit from those who do. They will also be able to collect the .001 fees that were attached with the 1%er in mind.

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Bitcoin developers are constantly adding and improving the code. I'm sure they will figure out a solution "40 years" from now to keep us all mining. I mean, if the value of 1 BTC was $10,000 in 2033, wouldn't you keep your miners going if you could get a 0.01 transaction fee? 0.01 BTC @ $10,000/BTC = $100. We have many years to speculate. The block rewards get smaller and smaller as the years go by, and by the very end of bitcoin generation, people will be so hard up for the tiny shards of bitcoin that they will be much more valuable. I hope so anyway.

"When warranted, we will respond to hostile attacks in cyberspace as we would to any other threat to our country," the report said as cited by Reuters. "We reserve the right to use all necessary means – diplomatic, informational, military and economic – to defend our nation, our allies, our partners and our interests."

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.

The equilibria (a) and (b) are absorbing states. The equilibrium (c) is unstable because it is profit-maximizing for one miner to buy out all the other miners and organize a monopoly.

Here are some rank orderings of the equilibria along different dimesnions.

In terms of supply of security (higher is better):a>c>b

In terms of txn fees (higher is worse):b>a>c

In terms of incentives of the monopolist to invest in complementary technologies (higher is better):a>c>b

In terms of incentives of other actors to invest in complementary technologies (higher is better):c>a>b

It is ambiguous whether c or a is the first-best outcome for bitcoin. In any case, we are likely to end up with a.

Thanks for illustrating the problem. Picture this scenario:

tl;dr - if I'm right, then the total cost of mounting a 51% attack in the "stable steady state future" is negatively affected by added competition between honest miners ... so someone trying to mount a 51% attack can just build/acquire more mining corps (at 0 net cost) in order to lower the cost of attack). Please read onward and tell me where I made a mistake:

- Assumptions: In 40 year(or 140, doesn't matter), block reward is essentially zero, and the major income of miners is from transactions fees. - There are N different non-monopolistic competing mining cooperation (this is the situation most beneficial to users - c). - For sake of simplicity, assume that all mining corps are equal in size, and neglect any freelance miners. - This is a steady state - the margins that these cooperation make are very close to zero, and there are almost no fluctuation in the price of BTC (compared to say the Consumer Price Index).

Now, every block (10 minutes) there is some average amount of transactions, for which the sum of the market price for the transactions fees is T. So, every block, a mining corp will make T/N in gross income, and so his expenses are very close to T/N per 10 minutes. We can see that the market worth of such a mining corp will be proportional to T (some constant times T), assuming N is fixed, because the amount of net revenue for a mining corp is proportional to T, and it's not economical to be mining if your net worth (or cost of construction of the corp) is many times higher than T X constant_multiplier.

Note that this is unlike the situation today, where a miner or mining corp's "cost of construction" or net worth is roughly proportional to the changing block reward (soon 25) and the fluctuating rate of BTC ... besides we're far from any kind of steady state. But in this theoretical future, I don't see any reason why the economical cost to construct a mining corp will be very different than T X constant.

Now let's say some rich entity wants to gain 51% of the hash power in order to perform double spend attacks. The cost of building N+1 mining corps is T X constant X (N+1). These don't just have to be built, parts or full existing mining corps can be taken over by roughly the same cost expenditure.

Now here is the potential problem. From the above calculations, the cost to performing a 51% attack is proportional to the average market price of transaction fees in a block, times some constant. If a lot of transactions are not conducted on the blockchain, but instead move to 2nd level networks, this number drops ... Note that miners are competative (our assumption), so as N gets larger, the TX fees drop ... and the cost of mounting a 51% attack drops. A new honest mining corp has incentive to start mining if it can get efficient electricity, good mining gear, and other reasons, all unrelated to the fact that the very act of opening a new mining corp lowers the transaction fees and lowers the cost of 51% attacks.